Court File and Parties
SUPERIOR COURT OF JUSTICE – ONTARIO – DIVISIONAL COURT
RE: HOME DEPOT HOLDINGS INC., Appellant
AND:
THE CORPORATION OF THE TOWN OF MARKHAM, Respondent
BEFORE: JENNINGS, McCOMBS and MOLLOY JJ.
COUNSEL: Peter Milligan and Adam J. Stephens, for the Appellant
Melissa VanBerkum for the Respondent
HEARD: March 8, 2010
Endorsement
Overview
1The appellant Home Depot appeals from the decision of Pitt J. dated June 26, 2009, dismissing Home Depot’s application for a declaration that the respondent (“Markham”) could not recover approximately $2 million in property taxes which it had failed to bill to Home Depot between 2001 and 2007.
2At issue is a pure question of law on the proper interpretation of ss. 331 and 359 of the Municipal Act, 2001, S.O. 2001, c. 25 (“the Act”). The parties submit, and we agree, that the appropriate standard of review is correctness.
3The parties are also in agreement as to the proper principles to be applied in interpreting statutes in general, and taxing statutes in particular. (See Municipal Property Assessment Corporation v. BCE Place Limited, [2009] O.J. No. 3338; Quebec (Communaute Urbaine) v. Notre- Dame de Bonsecours (Corp.), [1994] 3 S.C.R. 3 para. 25; Re Rizzo v. Rizzo Shoes Ltd., [1998] S.C.J. No. 2; Sullivan R., Sullivan on the Construction of Statutes (5th ed. (Markham: LexisNexis, 2008) at p. 359-365)
4There are no facts in dispute.
Background
5Home Depot acquired vacant property in Markham and in 2001 built a large commercial store. Because this was a new building entering the taxation system, it was an “eligible property” under s. 331 of the Act. Therefore, the property tax payable was calculated in the first instance based on the current assessment value (“CVA”).
6There is no dispute between the parties as to the CVA for the subject property. It is accurately set out in the tax notices sent by Markham commencing in 2001. However, due to “inputting and calculation errors” made by Markham, the actual taxes charged to Home Depot were substantially less than they would have been if calculated correctly. Home Depot paid the amounts for which it was billed. The difference between what Home Depot paid between 2001 and 2007 and what it would have paid but for the mistakes made by Markham is approximately $2 million.
7The Act contemplates that “eligible properties” will be taxed based either on the CVA, or on some lesser amount if comparable properties are being taxed at a lower rate. The process for determining the proper tax rate is set out in s. 331. Essentially, the Municipal Property Assessment Corporation (“MPAC”) selects up to six comparable properties. The average level of taxes for those properties is then compared to the CVA for the eligible property. The taxes for the eligible property are then required to be the lesser of the average for the comparable properties or the taxes based on the CVA. Counsel for both parties agree that in the normal course, if the taxes for the eligible property are billed properly in the first instance, the process under s. 331 cannot result in any tax increase for the taxpayer, but may result in a decrease if the taxpayer was paying more in tax than owners of comparable properties.
8MPAC provided the list of comparable properties to Markham in February 2003. However, Markham did not provide the list to Home Depot until September 2007. Although s. 331(11) states that the municipality “shall” mail the list to the property owner within 60 days of receiving it from MPAC, this Court has held that this is not a true limitation period, but is directory rather than mandatory: Neamsby Investments Inc. v. The Corporation of the Town of Markham (2007), 62 R.P.R. (4th) 287, [2007] O.J. No. 4573 (S.C.J.); aff’d [2008] O.J. No. 3440 (Div.Ct.), leave to appeal to C.A. denied.
9Markham did not commence its calculations for the Home Depot property under s. 331 until sometime in 2007. It was only during that process that Markham discovered the errors that it had made. Those errors were not in any way related to the s. 331 process; it is mere happenstance that the errors came to be discovered at that time. The taxes payable by Home Depot based on its CVA were slightly lower than for the comparable properties. Therefore, the s. 331 process itself (which involved comparing Home Depot’s taxes based on its CVA to the taxes levied on comparable properties) had no impact on the tax to be paid by Home Depot. However, Markham takes the position that it can, and indeed is required to, use the s. 331 process to adjust the taxes payable by Home Depot, both as a result of any comparison contemplated by s. 331 (which would result in no change) and any mistakes previously made by Markham (which would result in an additional tax liability of $2 million). Therefore, Markham amended its tax rolls to reflect the correct amount of tax payable going forward and issued a tax bill to Home Depot for $2 million in back taxes not previously billed due to Markham’s errors. Home Depot acknowledges Markham was entitled to amend the rolls for the future, but objects to the use of s. 331 to collect the back taxes.
10Home Depot takes the position that to the extent Markham is seeking to collect additional taxes not previously billed, it is bound by s. 359 of the Act. Under that provision, a municipality is permitted to increase taxes levied if there has been an “undercharge caused by a gross or manifest error that is a clerical or factual error, including the transposition of figures, a typographical error or similar error, but not an error in judgment in assessing the land.” However, such a claim for recovery of the undercharged amounts can only be made in respect of the current tax year and the previous tax year. The parties agree that the errors made by Markham in this case fall within the description of the type of errors included within s. 359. They also acknowledge that if that section applies, Markham would only have been entitled to recover additional amounts for 2006 and 2007.
The Issue
11The sole issue between the parties is whether s. 359 applies to a situation in which the property is an “eligible property” under the Act and the municipality discovers its error prior to completing the process of tax calculation under s. 331. Markham submits that as part of the s. 331 process it can correct any previous errors it made and collect any amounts previously unbilled, regardless of the nature of the mistake that led to the undercharge. Home Depot submits that the s. 331 process is solely a calculation process and collection of any additional taxes for the period already billed can only be done under s. 359, not s. 331.
12The application judge ruled in favour of Markham on this issue and held that since the purpose of s. 331 was to ensure that comparable properties are taxed at comparable rates, it should be interpreted in a manner that would permit Markham to collect taxes from Home Depot for the whole period from 2001 to 2007, based on the correct taxes that would have been payable but for Markham’s errors.
Analysis
13With respect, we find that the application judge erred on this issue. The provisions in s. 331 must be interpreted within the context of the statute as a whole. We accept that the general purpose of s. 331 is to ensure fairness to the taxpayer owning eligible property by ensuring that the taxes calculated based on CVA do not result in the taxpayer paying more tax than is being paid by owners of comparable properties. However, that is the extent of the purpose of s. 331. In particular, s. 331 is not meant to provide an additional right of error correction for either party.
14Section 331 is found in Part IX of the Act, which is entitled “Limitation on Taxes for Certain Property Classes.” It follows Part VIII, which is entitled “Municipal Taxation.” Both of these Parts relate to the process by which taxes are calculated. Section 359 is found in Part X of the Act, which is entitled “Tax Collection.” There is nothing in the language of s. 359 that would make it inapplicable to properties that are subject to s. 331 of the Act. It is a section of general application. There is an exception provided in s. 359(2) for situations in which the treasurer of a municipality has issued a tax certificate certifying taxes owing, but no other exceptions are noted. There is a roughly equivalent provision in s. 357 of the Act, imposing the same limitation period on applications by taxpayers who discover an error that has resulted in an overpayment of taxes. Limitation periods such as these are common in taxing statutes and reflect an underlying recognition that there must be finality to a taxpayer’s exposure to tax liability in respect of past years. In terms of entitlement to this protection, there is no rational basis for concluding that a taxpayer who owns an “eligible property” for which there has not yet been a s. 331 review should be in any different position from any other municipal taxpayer.
15This is particularly so in light of the conclusion in Neamsby that the s. 331 review may be substantially delayed beyond the 60 day period referred to in the Act, indeed may take place (as it did here) years after the fact. The objective of finality is therefore an important consideration.
16The fact that the municipality is required to amend its tax rolls upon completion of the s. 331 process does not mean that the municipality is “required” to correct every type of error it may have made in the preceding years, regardless of the other provisions of the legislation. Part IX (and s. 331) cannot be read in isolation. There is a rational interpretation of both s. 331 and 359 that would enable each to be interpreted in their plain and ordinary meaning and to operate together within the statute as a whole. Such an interpretation would restrict any changes made under s. 331 to future tax years, while permitting reimbursement to the taxpayer of overpayments solely on the basis that the tax rate was found to be too high when compared with other properties, to which s. 331 is directed. If other errors were made by the municipality for which it seeks additional recovery, it would need to bring itself within s. 359.
17Such an interpretation does not do violence to the language of either of the provisions and puts all taxpayers in the same position with respect to the finality of taxes levied against them in the past. It also is consistent with the overall scheme of the Act which deals in Part IX with matters of calculation and in Part 10 with matters of tax collection. We recognize that interpreting s. 331 as permitting the municipality to correct any and all prior errors and bill to recover all undercharges is consistent with the legislative objective of ensuring that property owners are taxed accurately and pay their fair share of taxes in relation to the rest of the population. However, that is not a purpose unique to s. 331; it is consistent with the general principle of fair taxation underlying the whole of the Act. Limitations periods, such as the one in s. 359, to some extent conflict with that principle, or perhaps more accurately, balance it against the competing principle of finality in taxation. The interpretation of s. 331 by the application judge in this case focused on the accurate and fair taxation principle without taking into account the legitimate legislative objective (certainty and finality) underlying the limitation periods in ss. 357 and 359 of the Act.
18The proper interpretation of s. 331 would harmonize both objectives by extending the protection of s. 359 to all taxpayers and at the same time ensuring that on a go-forward basis the taxpayer is required to pay its fair and accurate share of the tax burden.
Conclusion
19Accordingly, the decision of the motions judge is set aside. An order shall issue declaring that s. 359 of the Act applies to any claim by Markham to collect taxes for amounts not billed due to errors of calculation and input made by Markham and requiring Markham to reverse the changes it made to the subject property’s taxes for the years 2001 to 2007 and to restore the tax rolls for those years to their originally billed amounts. The precise form of the appropriate relief was not fully addressed in argument. Accordingly, if there are any issues between counsel as to the appropriate form of the order, submissions may be made to the court in writing.
Costs
20The parties have agreed that costs shall be to the successful party fixed at $15,000 all inclusive. So ordered.
JENNINGS J.
McCOMBS J.
MOLLOY J.
Date: March 10, 2010